The Commonwealth Bank now has the dubious distinction of having the two largest penalties ever imposed on an Australian company after it did a deal to end the embarrassing Austrac money laundering case by agreeing to a $700 million fine (and legal costs of $2.5 million) and making a new set of admissions over the breaches.
This follows the move last month by the bank regulator, APRA to impose a $1 billion indefinite extra capital penalty on the bank.
The bank set aside $375 million to cover the potential fine in its first half-year results, and it said it would take a $700 million provision over the full year to June 30.
CBA has admitted to the 53,506 breaches of which it was accused by the regulator – and to further contraventions – bringing to an end a scandal that led to Ian Narev’s departure as chief executive.
The deal is subject to Federal Court approval.
Investors greeted the settlement positively, pushing CBA shares up 1.7% on Monday to end at $69.88, safely higher than the near five year lows that the shares touched last week.
CBA chief executive Matt Comyn said the lender had not deliberately breached the law by failing to provide the regulator with timely notification of potentially suspicious transactions, but admitted that the bank’s risk procedures and due diligence were not up to scratch.
“While not deliberate, we fully appreciate the seriousness of the mistakes we made,” Mr Comyn said in a statement to the ASX. "Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward."
CBA will record a $700 million provision in its results for the year to June 30, which will be announced on August 8.
Mr Comyn, who was promoted to replace Ian Narev in April, said CBA had spent more than $400 million on anti-money laundering compliance measures.
"Banks have a critical role to play in combating financial crime and protecting the integrity of the financial system," Mr Comyn said.
"We have also agreed with AUSTRAC that we will work closely together based on an open and constructive approach."